Do you need a Demat Account for investing in Mutual Funds?

A Demat Account is an online account that you can use to hold securities in a ‘dematerialised’ or digital form. A Demat Account can be used to hold multiple types of securities such as stocks, bonds, Mutual Funds, etc. Moreover, it is easy to use and offers you a lot of conveniences. However, it is not mandatory to have a Demat Account to buy Mutual Funds. Read on to know more about this.

Why do you need a Demat Account to buy Mutual Funds?

A lot of people wonder whether they need a Demat Account for investing in Mutual Funds. It is important to know that a Demat Account is only mandatory for investing in stocks and no other security. However, while you do not need the account to buy Mutual Funds, it can help to have one nevertheless. 

Here are some advantages of having a Demat Account:

  • The account offers you a common place to hold all of your investments. This makes it simpler to track and manage your money and make better investment decisions to reap good returns. 
  • You can get a single statement to view all your Mutual Fund holdings from different schemes from your account. 
  • Having an online account offers great accessibility. You can carry out fast and seamless transactions as opposed to storing your investments physically. 
  • A Demat Account offers better security. All your information is safely stored. There is no possibility of a physical loss or damage to important documents, certificates, etc. Moreover, using the account also minimises the chances of falling victim to a theft or a scam. 
  • You can add a nominee to your account to enable a smooth transfer of units to them in the unfortunate event of your demise.

You can read more about the benefits of a Demat Account here.

What other options can you choose when investing in Mutual Funds?

There are some other ways to invest in Mutual Funds. For instance, you can invest directly with the Asset Management Company (AMC) or through an online provider. But each of these options can have some drawbacks. Here’s a comparison that can help you understand this better:

Directly through an asset management company

AMCs offer the option to invest in Mutual Funds on their official websites. Simply visit the AMC’s website and select the funds you want to invest in. You will then be required to visit the AMC’s physical branch and submit an application form along with a copy of your PAN card, KYC documents, and a cheque. Once your application is approved, the company will provide you with a PIN and folio number that you can use to manage your investments. 

The process may not seem too complicated, but if you invest in Mutual Funds of different AMCs, you will have to carry out this process individually every time you invest in a new Mutual Fund. 

Through independent online portals

You can also opt for an independent provider to invest in Mutual Funds. For this, you will have to register with the portal. The registration process is more or less the same as in the case of an AMC. However, you have the advantage of being able to use a single account to manage all your Mutual Fund schemes. But it is important to verify the authenticity of the provider before you invest in any money to avoid getting scammed. You should also check if the portal is approved by your bank for NetBanking.

Through a Demat Account

Opening a Demat Account requires you to select a depository participant (DP). Once you have selected a DP, you can submit the application form, identity proof such as PAN, and other important KYC documents. The DP will verify your KYC information and accordingly approve your application. 

You will then receive an account number and password that you can use to access your Demat Account. This account can be used for all your investments in different Mutual Fund schemes and other securities. So, the overall management will be hassle-free and a lot more efficient.

HDFC Bank Demat Account  can be ideal for investing in Mutual Funds. You also use the same account to invest in initial public offerings (IPOs), exchange-traded funds (ETFs), sovereign gold bonds (SGBs), bonds, equity, and non-convertible debentures (NCDs).

Here are some benefits and features of having an HDFC Bank Demat Account :

  • Fast, paperless, and seamless process for account opening (takes all of five minutes)
  • Ready-to-trade account for immediate investing
  • Convenient transfers of your portfolio from any DP to HDFC Bank DP
  • Option to take digital loans against securities or Mutual Funds

Want to open a Demat Account? Click here to get started.

*Terms and conditions apply. This is an information communication from HDFC Bank and should not be considered as a suggestion for investment. Investments in securities market are subject to market risks, read all the related documents carefully before investing.